Regional disparities will be widened by new government Apprenticeship Levy, finds IPPR

London and the South East will benefit most from the government’s new Apprenticeship Levy, while those areas described by the Prime Minister as ‘left behind’ by globalisation will receive proportionately less investment for vital training opportunities, according to new research by IPPR.

The Apprenticeship Levy is intended to boost investment in training across the country, yet the government has admitted it has not carried out its own assessment of the regional impact of the levy.

Analysis of the annual business survey by IPPR shows that the levy will stimulate training most in London and the South East. These regions have 38% of the UK’s large businesses, which will be affected by the levy, but only 27% of the population. London and the South East also have among the highest qualified populations in the country, with 50 and 40% respectively of their populations educated to level 4 and beyond, compared with 30% for example in the North East and Yorkshire and the Humber.

The levy will raise less money, and stimulate training less, in the areas that need it most - the regions hit hardest by de-industrialisation, which suffer from low levels of qualification, low productivity and low pay. These areas also recorded among the highest vote shares for Brexit. But with public funding for adult skills cut by 40% since 2010/11 and employer investment in training in decline, there is no sign of the extra investment promised to increase economic opportunity in ‘left behind areas’.

The government’s apprenticeship levy will come into force from April. But the £2.6 billion it will raise in 2016/17 will fail to restore employer investment to the levels seen a decade ago, and as funding raised will be spent through employer vouchers it will not support local devolution.

IPPR is calling for a new ‘Skills Levy’ to be introduced to boost employer investment and to turbo-charge skills devolution. The Skills Levy would raise over £5 billion – twice the amount raised by the apprenticeship levy. It would be:

Broader, applying to all employers with 50 or more staff;

Larger, set at one per cent of payroll for the largest employers (250 or more employees) - twice the current level;

Fairer, with a £1.1bn 'Regional Skills Fund' to boost investment in left behind areas, as a result of top slicing investment from the largest employers

The report also finds that:

Too many employers fail to use the skills of their workforce – a third of people say they have a qualification beyond what is needed for their role – nearly nine million people are ‘over-qualified’ – the highest rate in the EU;

Those most likely to benefit from training are least likely to participate - those from the highest socio-economic groups are twice as likely to participate in training as those from the lowest groups

Clare McNeil, IPPR associate director for work and families, said, “The Brexit vote showed that large areas of the country felt left behind by economic change. But the government’s Apprenticeship Levy risks exacerbating the regional inequalities it has pledged to reduce. With Brexit on the horizon, and the increasing impact of technological change on jobs, now is the time to be investing in high quality vocational education to improve opportunities for workers.

“Ahead of the budget IPPR has been joined by a cross-party line-up of mayoral candidates calling for a new skills levy to increase investment, including through a regional skills fund to ensure more investment goes to those areas where it is needed the most. This devolved funding would also give more control to local leaders to ensure investment can reflect local priorities.”

The proposals for greater skills devolution and investment has been backed a cross-party line up of mayoral candidates:

Andy Burnham, the Labour party's candidate for Manchester Mayor, stated, "Throughout the Mayoral campaign I’ve been going around the ten boroughs asking people about their priorities for Greater Manchester. One issue that is raised almost everywhere is the shortage of skills and how we equip people with the training they need to access secure and well-paid employment.

"We want Greater Manchester to play a leading part of the new industrial revolution but not based on a low-paid, low-skilled call centre economy where young people are expected to carry out work experience for little or no pay.

“I want to see a thriving Greater Manchester where everyone benefits from our economic success. The Skills Levy can help to achieve that by making sure the money goes to the areas where it’s needed most – those areas where people feel left behind and forgotten.”

Sean Anstee, the Conservative party’s candidate for Manchester Mayor, commented, “If we want Greater Manchester to be a place where people are able to access good jobs, with good prospects of promotion and where businesses are able to be more productive and profitable, then we must take decisive, bold action to address our skills shortage and help people get ready to start and stay in work.

“The skills levy offers greater ability and flexibility to a newly elected Mayor to transform how our skills and employment system works for local people and could provide a much needed boost to making sure all parts of Greater Manchester are able to realise their potential and feel part of our shared success."

Steve Rotheram, Labour’s candidate for Liverpool Mayor, added, “Devolution is all about being able to take the decisions that will help us close the North/South divide. The skills agenda is absolutely pivotal to how we lift the city region’s productivity and prosperity by ensuring local people have the right skills to support our growth sectors.

“But for devolution to achieve its potential we need the full-blooded support of government, rather than a half-hearted version, and they need to get behind IPPR’s proposed Regional Skills Fund. In terms of skills, £21 million would provide the means for the Metro Mayor to operate at the strategic level to start to translate the Northern Powerhouse rhetoric into reality."

Hang Ho, head of philanthropy for Europe, Middle-East and Africa at J.P. Morgan, said, “It is critical that the UK Workforce has access to a wide range of skills which are relevant to the labour market and that bolster the long term health of the UK’s economy.

“The right training is key to this and it’s the joint responsibility of employers and policymakers to work together to ensure the UK’s current skills gap doesn’t widen any further and proactive steps are taken to reduce the gap.

“We are in a period of rapid global change and a skilled workforce is fundamental to creating a stable economic future for the country.”